Wednesday, August 10, 2016

Digital Transformation and the First Law of Thermodynamics

The First Law of Thermodynamics states, "energy can be changed from one form to another, but it cannot be created or destroyed.” In a business context that can be interpreted to mean if energy is being used to resist change, then it is not available for making change. Change is difficult. The default mode for most organizations and people is to resist change. Blockbusters’ own board resisted digital and business model transformation out of concern for short-term profits, which doomed it. Businesses that can direct energy to fast and positive transformation can exploit many more opportunities than enterprises mired in resistance.

Digital transformation and business agility are increasingly important in order to succeed, and both of these consume energy in the form of resources, available funds, credit, skills, change resistance, leadership, mental and emotional energy, time, etc. Enterprises need a method by which they can measure and monitor the amount of energy they have available to commit to digital transformation. Knowing how much energy is available requires a formula for calculating the number of digital energy units (DEUs) currently in reserve, how many are being created over a specific period of time, less the number of energy units each project and tasks consumes in a particular time frame. To that end, all business capabilities should be assigned DEU values so a total energy score (TES) can be computed.

All digital transformation tasks and projects consume and generate DEUs. As a result, the second step is to identify how many DEUs each task will consume. If digital transformation can be implmented with minimum resistance from the board, executive team, employees and customers, then those DEUs can be dedicated to making the changes required, however, if there is major resistance to change from any combination of these constituents, then there is less energy available for making the changes required.

Once the number of available DEUs are known, enterprises can track their total energy scores to maintain a self-sustaining agile business. Self-sustaining means you are NOT consuming all of your available energy, leaving nothing left to run the business, rather each digital transformation tasks is producing the same or more DEUs than it is consuming. Higher total energy scores that are self-sustaining, support a higher level of business agility, while lower scores limit agility and digital transformation possibilities.

It would be fair to ask why we are not just tracking ROIs. My answer is change consumes many things that are not reflected in P&L statements, such as emotional energy, time, goodwill, skills and other available resources. A company with a lot of money in the bank and the right skills to accomplish the tasks, but is emotionally drained and lacks goodwill as a result of overwork and too much change, does not have the required DEUs available for future business agility.

In a world in permanent flux, enterprises with higher total energy scores have a competitive advantage in the form of business agility and energy to use for digital transformation efforts. As real-time data is analyzed, and changes in trends detected, businesses with higher total energy scores are in a far better position to exploit emerging trends. What is your score and how long will it last?

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***Full Disclosure: These are my personal opinions. No company is silly enough to claim them. I am a mobility and digital transformation analyst, consultant and writer. I work with and have worked with many of the companies mentioned in my articles.